"While China’s exports are slowing, they’re still edging out competitors. The country’s share in global exports surged to an unprecedented 15 percent this year, from 8.7 percent in January 2010, according to data compiled by Bloomberg. The ratio increased even as the inflation-adjusted yuan rate appreciated 33 percent against its major trading partners.
...
Chinese exporters are resilient amid the yuan’s appreciation partly because it’s difficult for companies to replicate the manufacturing system, including infrastructure, supply chain and skilled labors, in other countries, according to Alex Wolf, an economist for emerging markets at Standard Life Investments Ltd.
...
The importance of overseas shipments as an economic growth driver has been declining. Exports accounted for 23 percent of the economy last year, compared with a peak of 36 percent in 2006, according to the World Bank."

Under the new rules, the fund will be allowed to invest up to 30% of its net assets in domestically-listed shares.

The fund will be allowed to invest not just in shares but in a range of market instruments, including derivatives. By increasing demand for them, the government hopes prices will rise.

The Hong Kong Hang Seng index followed the mainland's sharp decline, dropping 4% to 21,523.57 points in early trade.

A 'one-trick pony'?
Simon Littlewood, president at business advisory firm ACG Global told the BBC there were concerns that the world's second biggest economy was "a one-trick pony as they have been trying repeatedly over the past few months to put more liquidity into their economy", yet so far have failed to calm markets.

Over the past week, China's benchmark Shanghai Composite fell 12%, adding up to a 30% drop since the middle of June.

The sharp fall sparked a global sell-off, with the Dow Jones in the US losing 6%, while the UK's FTSE 100 posted its biggest weekly loss this year of 5%.

Earlier this month, the Chinese central bank devalued the yuan in an attempt to boost exports.

Chinese traders have seen equities drop some 30% since JuneIMF: 'No crisis'
Over the weekend, the International Monetary Fund weighed in on the global sell-off in an attempt to avoid further market panic.

China's economic slowdown and fall in equities was not a crisis but a "necessary" adjustment for the economy, a senior IMF official said on Sunday.

"It's totally premature to speak of a crisis in China", Carlo Cottarelli, IMF executive director representing countries such as Italy and Greece on its board, told a press conference, reiterating the international lender's forecast for a 6.8% expansion of the Chinese economy this year, below the 7.4% growth achieved in 2014.

On Friday, figures showed China's factory activity in August shrank at its fastest pace in more than six years.

This came after official figures showed the country's economic growth continuing to slow. For the three months to the end of July, the economy grew by 7% compared with a year earlier - its slowest pace since 2009.

Is China's Economy Past the Point of No Return? Gordon G. Chang
December 25, 2016

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The most important driver of events in 2017 could very well be the Chinese economy, which is shaking the country’s political system and affecting its external policies.

Beijing, which once thought it would dominate the world, has been playing defense for the last year and a half as almost no economic trend has been going its way.

Next year, China’s economy will more resemble the turbulent 2015 than the relatively calm 2016. The measures employed to stabilize the situation, which looked like they worked in the beginning of this year, have only made it more difficult for Chinese technocrats to rescue the situation in the longer term.

We start on the 14th of this month, when Janet Yellen inadvertently highlighted China’s fragility. The Federal Reserve’s hawkish comments on interest rates—the central bank signaled three rate increases next year instead of the expected two—along with the quarter-point rise in rates forced bond prices down across the world. In China, the damage was historic.

Last Thursday, just a few hours after the Fed’s announcements, futures on China’s benchmark 10-year obligation stopped trading when they hit the daily down limit, the first time that has ever occurred. Trading on the five-year also was halted, another first. The People’s Bank of China, the central bank, injected the equivalent of $22 billion in short-term money, and that allowed trading to resume.

The next day, bond prices recovered in China, but only because the PBOC injected more than $57 billion. Beijing, by brute force, was able to stabilize the bond market, already rocked by defaults and cancelled offerings.

And the Chinese central bank has also muscled the currency markets by orchestrating rescues. The renminbi is ailing, down 6.9% this year against the dollar. Beijing once had ambitions of the “redback” replacing the greenback as the world’s reserve currency, but now it is merely trying to stage an orderly descent.

If the renminbi were allowed to float and if there were no capital controls, Chinese money would become worthless. China’s people and businesses certainly don’t want to hold it, and increasingly the same is true for foreigners. International use of the renminbi, even in the face of Beijing’s strenuous efforts, has declined this year.

Last year, there was $1 trillion of net capital outflow according to Bloomberg. This year, despite the imposition of draconian capital controls, the outflow could approach last year’s astounding total. And those controls, which are now failing to prevent capital fleeing, are working against Beijing’s efforts to attract investment cash from the outside. Few want to invest in China because repatriation risk is high and growing.

Many people, pointing to China’s forex reserves, don’t worry about a tumbling currency. The State Administration of Foreign Exchange, the custodian of the country’s forex hoard, reports that those reserves amounted to $3.05 trillion as of the end of last month.

Yet that number is almost certainly too high. Beijing has been engaging in dubious practices designed to hide the depletion of reserves caused by the support of the renminbi. For instance, there is incomplete reporting of its use of forward contracts to mask its selling of dollars, a trick Chinese technocrats learned from Brazil in 2013.

More important, Beijing has used its reserves, which are supposed to remain liquid, for long-term investments, such as the so-called One Belt, One Road infrastructure projects, and for loans to Venezuela and other risky borrowers. The reserves have also been deployed to capitalize China Investment Corp., the country’s sovereign wealth fund. No one outside a small circle in Beijing knows the amount of these ill-liquid investments, but they amount to at least $400 billion.

Finally, SAFE’s monthly announcements of changes in the reserves are questionable. It has continually been announcing monthly declines smaller than the estimates of analysts, a sign of deliberate misreporting.

In short, China’s liquid reserves are, in all probability, substantially less than Beijing claims, which means the country may soon run out of ammunition to defend the sagging renminbi. The liquid reserves are almost certainly far smaller than the $2.8 trillion IMF guidelines recommend China maintains.

None of this would matter if China’s economy were growing fast. The official National Bureau of Statistics has announced that gross domestic product increased 6.7% in each of the first three quarters of the year. Many observers believe growth is more likely to be half that figure.

Yet even if China is growing at a 6.7% clip, the country is creating debt at least five times faster than incremental GDP. At the moment, the debt-to-GDP ratio could be as high as the 350% that George Soros noted in January at Davos or the 400% that the respected Orient Capital Research in Hong Kong estimated at the beginning of this year. In any event, debt is far too high and its rate of accumulation much too quick.

Beijing can continue its rescue efforts for some time—perhaps years—because it runs an increasingly state-dominated economy, but state economies tend to fail spectacularly when they go.

Why? Underlying imbalances build up while leaders postpone downward adjustments, like they have been doing, especially since 2008. They will continue to intervene until they no longer have the ability to do so. When they no longer have that ability, their economy will go into free fall.

And the election of Donald J. Trump makes the work of Chinese leaders far more complicated. If the 45th president engineers a recovery in growth in America with lower taxes and less regulation, even more money will flow back across the Pacific and make it almost impossible for China to avoid a severe contraction.

A severe contraction has implications for Xi Jinping, China’s wilful leader. He has taken over much of the economics portfolio from Premier Li Keqiang, a long-term rival, and therefore has made himself the “Chairman of Everything.” As such, Xi has become responsible for all economic developments, but he can neither control them nor solve problems. China’s economy could very well be past the point of no return, and so Xi’s hold on power cannot be as firm as many suggest.

Already, there are hints that the country’s severe economic problems have affected the still-incomplete leadership transition from Hu Jintao to Xi. Premier Li, from the same political faction as Hu, and Xi clashed in July over the role of state enterprises in the economy. In May, Xi tried to take down Li by criticizing his debt-fueled policies in the pages of People’s Daily, the most authoritative publication in China, by arranging for an “authoritative person” to warn of a “systemic financial crisis.” Senior figures this year could not keep their disagreements out of sight, and the feuding is a sign of a fracturing leadership team.

Infighting at the top, over economic and other issues, affects the country’s external policies. As civilians like Xi and Li squabble, the generals and the admirals of the People’s Liberation Army are gaining political influence.

We saw hints of PLA power when Bo Xilai, one of the country’s most popular political figures, ran to the headquarters of the 14th Group Army in Kunming in February 2012, during the time of his desperate maneuverings.

Xi’s purges of Bo and the infamous Zhou Yongkang, the former internal security boss, were related to their apparent collusion with PLA elements. This collusion is what made their defiance especially dangerous to Xi.

All this suggests China’s flag officers have now eased into a powerbroker role. The military lost political power in the 1990s as China transitioned from Deng Xiaoping, a military officer, to Jiang Zemin, a civilian.

But the PLA has been making a comeback since the turn of the century as civilian leaders enlisted flag officers in their political struggles with each other, something apparent in the transition from Jiang to Hu Jintao.

And apparent in the transition from Hu to Xi. Once attaining the top spot, Xi has looked to certain officers to be the core of his political support. As a result, these generals and admirals now wield great influence over him, who relies on them for their backing. And Xi’s military support becomes more crucial to him as his popularity among civilian officials erodes, something evident from a series of acts of defiance in public in March.

At the moment, China’s general officers, pursing their “military diplomacy,” seem to be setting and implementing Beijing’s external policies, and this process has made those policies more provocative.

The weakening of China’s economy and its increasing belligerence are occurring in tandem, and the progression from one to the other appears to be related. For one thing, a deteriorating economy will undermine Xi Jinping’s bold efforts to consolidate power, and the resulting disunity will surely make China’s external posture unpredictable.

The country could turn inward, but lashing out looks more probable, especially if Chinese leaders think the decline in the economy will close a window of opportunity to achieve historic goals, like enlargement of Chinese control over neighboring lands and peripheral seas.

China’s economy is moving in wrong directions. In many ways, the rest of the world is bound to suffer as a result.

Finally China is to make an unequivocal declaration of support for globalisation. President Xi Jinping will be aptly making the globalist declaration at the World Economic Forum in Davos during January 17-20. This meeting of Davos is reported to be focusing on the rise of anti-globalist reaction as epitomised by the election of Trump. It will also likely address the concern at the rise of ‘populism’, the conservative political manifestation of anti-globalism that is not as easy to co-opt as the ‘left-wing’ variety, as indicated – again – by the left’s histrionic opposition to Trump.

This Davos meeting will provide for a parting swing by U.S. plutocrats and their frontmen, with the USA being represented by Vice President Biden and Secretary of State John Kerry in their presumably final notable acts in those positions.

Reportedly what President Xi will be touting is ‘inclusive globalisation’, while condemning ‘populism’ as promoting ‘war and poverty’. His globalisation agenda for Davos was outlined by Jiang Jianguo, head of the State Council Information Office, who told a symposium hosted by the World Trade Organisation at Geneva that ‘President Xi would go to Davos to push for development, cooperation and economic globalization in order to build “a human community with shared destiny”’. (‘China; Xi to promote globalization at Davos, not war and poverty’, Reuters, 11 January 2017; http://www.cnbc.com/2017/01/11/chinas-xi-to-promote-globalization-at-davos-not-war-and-poverty.html). Jiang explained:

‘With the rise of populism, protectionism, and nativism, the world has come to a historic crossroad where one road leads to war, poverty, confrontation and domination while the other road leads to peace, development, cooperation and win-win solutions’. (Ibid).

Vice Foreign Minister Li Baodong, in a briefing on Davos, said that ‘China would respond to the international community’s concern over globalization by putting forward Beijing’s opinions on how to “steer economic globalization toward greater inclusiveness”. Li said criticism of trade protectionism leveled at China, by Trump and others, was unjust. “Trade protectionism will lead to isolation and is in the interest of no one,” he said’. (Ibid).

Here we have the primary rhetoric that the globalists have long been using. The supposed demands and expectations of an ‘international community’ is an euphemism for the ‘international community’ of oligarchs, and the ‘public opinion’ generated by their mass media. Doing so in the name of ‘peace, development, and co-operation’ is indicative that China adopts the word-spin that has been used by Western politicians since Woodrow Wilson’s Fourteen Points promoted ‘free trade’ as a war aim in the name of a ‘new world order’, as it is now called. Imperial adventures since Alexander the Great have been justified in the name of peace and co-operation, and in today’s era often by reference to ‘human rights’. World War II was fought by the USA in the interests – again- of world free trade (globalisation) as overtly stated in Roosevelt’s Atlantic Charter. The devastation of Serbia in order to obtain the mineral wealth of Kosovo via globalisation was undertaken in the name of ‘peace and co-operation’. There is now a Kosovan department of privatisation. And so we might continue through history to the present day, with the imperial adventures, wars and revolutions that have been undertaken in the name of ‘peace’. China jumps aboard the globalist bandwagon and its true face is exposed now that there is a U.S. president-elect who has made some comments indicating that America’s globalist trade and foreign policies might be reversed. Now that lines of interest are being defined more forthrightly,

China is forced to show its hand as a primary partisan of globalisation. Indeed, if Trump does reverse the globalism, despite the prominence of luminaries from Goldman Sachs as his economic advisers, China will emerge as the primary state sponsor of globalisation, with Soros, Goldman Sachs, and Rockefeller clutching the coat-tails.

China is as always dominated by self-interest in the name of theoretical slogans. While practising a command economy it demands that other states remain open to their dumping. In New Zealand’ situation, recently poor quality Chinese steel has been imported. There is presently an investigation into the steel dumping, but there are always concerns when questions are raised in regard to trade with China that she will retaliate. This is ‘partnership’ and ‘co-operation’ as defined by China; the other ‘partner’ must always remain subservient. This demanded subservience is part of China’s mentality over millennia, when the emperor was upheld as the world ruler as mandated by heaven. This imperial mentality has substituted the state for the emperor. The steel dumping is a practical example of what China means by ‘globalisation’. (‘MBIE launches investigation into Chinese steel dumping’, Stuff Business Day, 23 December 20156; http://www.stuff.co.nz/business/87920079/MBIE-launches-investigation-into-Chinese-steel-dumping).

The omnipotent Henry Kissinger
Vice Foreign Minister Li added that ‘Channels of communication are open’ between China and Trump’s transition team at the forum, ‘but warned that scheduling a meeting might be difficult’. Again, the attitude is one of dominance and contempt for the foreigner behind the smiles and handshakes and Western-style business suits. However, regardless of Trump’s policy, the U.S. oligarchy is always assured influential contact with China via the perennial Henry Kissinger. The former Secretary of State, who has been close to oligarchic and especially Rockefeller interests for most of his long life, has not lost any time in assuring that regardless of Trump, China’s relations with the globalists will be maintained. Why would China need to maintain formal diplomatic relations with a Trump government when there will be business as usual via Kissinger’s jaunts between the highest levels of American and Chinese business?

Kissinger, whose so-called ‘ping pong diplomacy’ brought China into the world trade system during the 1970s, was fulfilling a major aim of the globalists, and in particular Rockefeller interests centred around the Trilateral Commission and the Council on Foreign Relations. Bloomberg News reports that Kissinger was in Beijing soon after Trump’s election, after having had secret talks with Trump on 18 November. Kissinger told CNN that ‘people should not be nailing’ Trump ‘to positions that he had taken in the campaign on which he doesn’t insist’. (‘China, Grappling With Trump, Turns to “Old Friend” Kissinger’, Bloomberg News, 2 December 2016,https://www.bloomberg.com/news/arti...ling-with-trump-turns-to-old-friend-kissinger).

If saving jobs from globalisation, which Trump clearly identified with China, is not a bottom line for the president-elect then nothing is. It is troubling if Trump indicated to Kissinger that the comments on China and globalisation were just election rhetoric. Certainly the appointments to the Cabinet from Goldman Sachs do not promote confidence.

Kissinger met with President Xi, thanking him for explaining ‘the nature of your thinking and the purposes of your long-range policy’; while Xi responded that he was ‘all ears to what you have to say about the current world situation and the future growth of China-U.S. relations’.

Gao Zhikai, interpreter for the late Chinese leader Deng, who had frequently met Kissinger, said that Kissinger was in ‘a unique position’ to act as ‘a messenger’ between the USA and China. ‘No one could replace him,’ Gao said. ‘No other Americans could get the same respect from the Chinese leaders or have as honest exchanges with Chinese leaders’. (Ibid).

The Bloomberg report states that Kissinger has visited China 80 times since his secret trip in 1971 (according to the official Xinhua News Agency) to restore diplomatic relations, and has met every Chinese leader since Mao. ‘State media heap praise on him during each visit, describing him as an “old friend of Chinese people”’. (Ibid).

‘Kissinger was among select U.S. experts - including former Treasury Secretary Hank Paulson and Elaine Chao, Trump’s nominee for transportation secretary - whom Xi met in February 2012 before taking power. The group advised Xi that frequent communication with his U.S. counterpart was more important than repeat formal visits, according to a person familiar with the meeting who asked not to be identified because the talks were private’. (Ibid.)

This indicates how world diplomacy works: above and beyond the formal governmental level; between oligarchs and their ambassadors such as Kissinger. We might add that Republican globalist Paulson, supporting Hillary Clinton, condemned Trump’s ‘populism’, but recently commended Trump’s choice of Steven Mnuchin as secretary of the treasury, coming over from his position as CEO of Goldman Sachs. (‘Former Hillary backer Henry Paulson hails Trump’s choice for treasury’, Newsmax, 30 November 2016; http://www.newsmax.com/John-Gizzi/john-gizzi-paulson-supports-steven-mnuchin/2016/11/30/id/761489/).

Brzezinski
Veteran Russophobe, Zbigniew Brzezinski, national security adviser for Jimmy Carter, and like Kissinger, close for much of his life to Rockefeller interests, is also a primary figure in having established relations between the USA and China. Brzezinski served as founding director of the Trilateral Commission, established by David Rockefeller for the purpose of promoting relations between China and the globalist oligarchs. In a recent interview withHuffington Post Brzezinski reiterated the globalist agenda, including the alarm over the spread of ‘populism’ and the Trump victory. Like Kissinger, Brzezinski remains a prominent player in international diplomacy. His views indicate that the Western-based oligarchs and China are in accord. Brzezinski remains as anti-Russia as he is pro-China, expressing the line that has been floated to the mass media that Russia interferes with internal politics, although the National Endowment for Democracy has long been sponsored by the U.S. government precisely for that purpose. Having been the negotiator of the USA’s ‘One China’ policy Brezinski was asked his reaction to Trump’s audacity of accepting a congratulatory phone call from Taiwan’s president, outraging China. As during the Cold War U.S. strategists still see China as an important element in containing Russia:

‘The danger I see is provoking antagonism in this foremost relationship of American foreign policy without any significant strategic accomplishment. It is not in our interest to antagonize Beijing. It is much better for American interests to have the Chinese work closely with us, thereby forcing the Russians to follow suit if they don’t want to be left out in the cold. That constellation gives the U.S. the unique ability to reach out across the world with collective political influence. … A world in which America and China are cooperating is a world in which American influence is maximized. If we reduce that through stupid irritations, what do we accomplish?’(Nathan Gardels, ‘Brzezinski: America’s Global Influence Depends On Cooperation With China’, The World Post, Huffpost, 23 December 2016; http://www.huffingtonpost.com/entry...a-influence-china_us_585d8545e4b0d9a594584a37)

Brzezinski sees Sino-U.S. accord as ‘maximising’ U.S. power. He was asked whether Trump’s pro-Russia indications would be useful in containing China as a rival to the USA. Brzezinski’s reply is an unequivocal ‘no’. He sees the real power players as the USA and China in tandem, as part of the ‘dominant pack’, and Russia as being kept subordinated.

‘Russia is not a rival to America in terms of what it has to offer in dealing with China. The Chinese know damned well that, though we may be weakened, depleted and confused, America is basically still number one in the world, and they, the Chinese, are also almost a number one. China thus has a choice to make. If it chooses to be against America, it will end [up] losing out. It is more in their interest to belong to the dominant pack. The reverse is also true for the U.S. if it pushes China away’. (Ibid).

Brzezinski uses the same rationale for justifying globalist world hegemony as that now being touted by President Xi at Davos; that only Sino-U.S. supremacy can assure global stability. Russia is of no account. She can be kept down by the two super-power hegemonists. China is reading from the globalist script written by Kissinger and Brzezinski. Brzezinski continues:

‘To underscore the strategic reality I’ve already outlined, the U.S. and China are the world’s dominant powers. To the extent we have worked together over the years since the normalization of relations, it has not been for the evil purpose of war or conquest, but for the good of enhancing the security and stability required for each to pursue their own interests. In today’s world, China can’t lead alone. Neither can the U.S. To put it in sharper, if seemingly paradoxical terms, if America tries to go it alone in the world without China, it will not be able to assert itself. If we keep that in mind, we can begin, gradually, to shape a world that is more stable than the world today, which is very unstable and very unpredictable. America’s long-term interests lie fundamentally with deepening our ties to China, not uprooting them for perceived short-term gain’. (Ibid).

How the Globalists created Modern China
The ‘people’s revolution’ in China was as phoney as Soros/NED sponsored ‘spontaneous revolts’ in Eastern Europe and North Africa. While this is not the place to examine how the USA scuttled Chiang Kai-shek, and how Taiwan under Chiang pursued a genuinely autarchic economic system for decades, we will briefly examine the way oligarchs secured China as a part of the globalist economic system. In an official history of the Council on Foreign Relations, the CFR’s Peter Grose explains:

‘The Council turned in earnest to the problem of communist China early in the 1960s. Various Council publications had started developing the idea of a ‘two-China’ policy - recognition of both the Nationalist government of Taiwan and the communist government on the mainland. This, Council authors suggested, might be the least bad policy direction. Professor A. Doak Barnett published a trail-blazing book for the Council in 1960, Communist China and Asia. A major Council study of relations between the United States and China commenced in 1964, the year China exploded its first nuclear bomb; the group met systematically for the next four years. “Contentment with the present stalemate in relations with the Chinese is not statesmanship,” declared Robert Blum of the Asia Society, the first director of the project. “American impatience and the strong currents of political emotion often make it impossible to plan ahead to manage our policy in a persevering but flexible way.’” (Peter Grose, Continuing The Inquiry:The Council on Foreign Relations from 1921 to 1996, New York, Council on Foreign Relations, 2006; ‘ ‘X’ Leads the Way’; http://www.cfr.org/about/history/cfr/index.html).

Robert Blum, the CFR China analyst, is referred to above as a luminary of the Asia Society. The Asia Society was founded in 1956 by John D Rockefeller III, and remains a major player in cultivating economic and diplomatic relations with China for the benefit of big business.

Taiwan presented a problem for the globalists insofar as the USA had guaranteed the Republic’s security.

The CFR therefore formulated a dialectical solution, seemingly supporting a ‘two China’ policy that in practise would mean that Taiwan could be ditched without being too obvious. That is what happened, as the USA used the ‘two-China policy’ formulated years before within the CFR to secure Red China’s entry into the United Nations, and to side-line Taiwan. The CFR approach was one of gradual promotion of the Mao regime, decrying the so-called ‘strong currents of emotion’ that were holding back the globalist relationship with China. However, Grose is explicit regarding the CFR attitude towards China:

‘This seemed just the sort of political stalemate that the Council on Foreign Relations, free of electoral and partisan constraints, was endowed to repair. Midway through the project, the Council published an analysis of public opinion called The American People and China by A. T. Steele, who reached the unexpected conclusion that Americans were more willing than many of their elected officeholders to forge new relations with China. This study argued that it was only a steady diet of hostile public statements that had made Americans “disposed to believe the worst of communist China and they [the Chinese] the worst of us.’” (Ibid).

The CFR re-mould so-called ‘public opinion’, the ‘international community’. The CFR report indicates that they believed the public would be susceptible to a pro-China policy, and the abandonment of Taiwan. Grose continues:

‘In 1969 the Council summed up the project under the title, The United States and China in World Affairs, publication came just as Richard Nixon, a longtime and outspoken foe of Chinese communism, became president of the United States. (Some months earlier, Nixon himself had chosen Foreign Affairs as his forum for exploring a fresh look at Asia in general, and China in particular.) Tilting at the long-prevailing freeze, the Council’s project defined a two-China policy with careful analysis. It advocated acquiescence in mainland Chinese membership in the United Nations, and argued that America must “abandon its effort to maintain the fiction that the Nationalist regime is the government of China.”’ (Ibid.).

Grose concludes by citing Kissinger and Cyrus Vance in their pivotal roles of opening up Red China, inaugurating the process that made a China world power:

‘Kissinger, acting as Nixon’s national security adviser, embarked on a secret mission to Beijing in 1971, to make official, exploratory contact with the communist regime. Nixon himself followed in 1972. The delicate process of normalizing diplomatic relations between the United States and China was completed in 1978 by Kissinger’s successor as secretary of state, Cyrus R. Vance, a leading Council officer before and after his government service’. (Ibid).

Now the globalist chickens are coming home to roost. Mr Xi goes to Davos with his globalist script, but a demarcation has been clarified by Trump’s references to China and globalisation. Mr Xi generously affirms that China is willing to take its place at the head of the globalisation process. This is the situation that has long been sought by Rockefeller, Soros, Goldman Sachs, and Trilateralist coteries in America, Asia and Europe.

China has adopted the Western liberal economic development model. There is no contradiction between liberalism and political authoritarianism. We’ve seen it since 1789 Jacobin France, and how quickly liberal-democracies respond to a situation with bombs and guns in the name of ‘human rights’. What the Western globalists talk of is for China to ‘reform’. This reform has been proceeding apace for decades until China stands as co-equal with the USA as a globalist hegemon; talks the same talk and walks the same walk. On the other hand, what the oligarchs want for Russia is very different: ‘regime change’. Russia cannot be left in peace until she is a subservient member of an international economic system. China is a globalist back-entry to Russia. The Russo-Chinese relationship seems to have brought China everything at Russia’s expense. It is worth keeping in mind that BRICS example was an idea floated by Goldman Sachs. (K. R. Bolton ‘BRICS development bank an instrument for globalization’, Foreign Policy Journal, http://www.foreignpolicyjournal.com...7/150714-BRICS-Development-Bank-KR-Bolton.pdf).

Also significant, although little recognised, is that the Western liberal economic development model adopted by China is a product of a civilisation in a terminal state of decay. China sought a transfusion from a diseased organism.

With the liberal economic model arrives concomitant elements of moral and cultural degeneration. The politically authoritarian character of China has attempted to minimise this impact on China. The emperors through millennia sought to adapt measured foreign influences while keeping the Chinese culture-organism immune from decadence. They were able to do this by maintaining China’s traditional nexus, and although there were the cyclic rise and fall of many dynasties, Chinese Civilisation remained. Mao unleashed the Red Guards during the Cultural Revolution in a zealous attempt to obliterate that tradition. Recently the Chinese regime has sought to revive something of China’s Confusion and Taoist traditions. Whether this is anything more than an attempt to manipulate tradition to maintain the authority of the regime is questionable. China already faces huge problems in terms of increasing marriage breakdown, where once there was none; urban sprawl, an ageing population and other issues related to a civilisation in a cycle of decay. In addition there are the problems of a market economy, such as pollution and soil depletion. China is, as Maoists were once fond of stating about the USA, ‘a paper tiger’.

China bears have had their fears reconfirmed over the nation’s mountainous debt by none other than the nation’s central bank governor. Is the world’s second-biggest economy heading for a crash?
On Friday, People’s Bank of China Governor Zhou Xiaochuan confessed to reporters that “non-financial corporate leverage is too high. First of all, (the debt levels of) every business, especially those with leverage that already is too high, have to be controlled."
The communist-ruled giant’s credit binge has taken total debt from around 150 percent of gross domestic product before the 2008 global financial crisis, to more than 260 percent currently.
Zhou’s deputy, Yi Gang, said the growth in leverage “isn’t conducive to the sustainable development of the economy and accumulates certain risks.”
Beijing plans to help restructure firms with excessive debt burdens, while also continuing to purge excessive industrial capacity. Zhou suggested support would be withdrawn for the infamous “zombie” companies, financially unviable firms surviving only on credit.
Nevertheless, the central bank boss said the process of deleveraging would not happen overnight.
“I personally think this process is relatively medium term. It won’t have very obvious results in the short term because the existing stock [of debt] is very large,” he said.
Zhou also said while measures by local governments to cool house prices would have some effect, housing loans would continue to grow quickly.
In February, China’s money supply continued to expand at a double-digit pace, with new yuan loans remaining high as banks continued to ramp up mortgage and infrastructure loans. M1, a measure of money supply, expanded by 21 percent compared to market expectations for a 16 percent rise, while the M2 money supply measure rose by 11 percent.
“Despite the government’s explicit call for deleveraging last year, credit continues to expand at a pace faster than nominal GDP growth. Specifically, rapid growth in property-related lending is increasing the concentration risk on bank balance sheets and could potentially increase instability in the financial system,” ANZ Research said in a February 17 report.
The Australian bank’s economists also pointed to the growth in so-called “shadow banking,” which reached 26 trillion yuan ($3.8 trillion) in June 2016.
“Besides the absolute size, we are also concerned with the growing interconnectedness between banks and non-bank financial institutions through the selling of wealth management products. These products are not only off-balance sheet items but also carry considerable credit risk,” the economists said.
“While household debt in China is still below 50 percent of GDP, the rise of around 15 percentage points since 2010 bears close monitoring,” they added.
U.S.-style crash?
U.S. billionaire investor George Soros has noted an “eerie resemblance” between conditions in China and those in America leading up to the 2008 financial crisis.
“It’s similarly fueled by credit growth and an eventually unsustainable extension of credit,”
he told the Asia Society last April.
Soros is not alone in ringing the alarm bell. BlackRock’s CEO Laurence Fink has also warned investors to be worried, while Goldman Sachs has reported that China’s shadow banking sector raised concerns about its “underlying credit problems and sustainability risk.”
According to Bloomberg Intelligence, corporate debt has seen the biggest increase, rising over the ten years to 2015 by 60 percentage points to reach 165 percent of GDP. Household debt climbed to more than 40 percent of GDP, up 23 percentage points, while government borrowings reached 22 percent of the economy.
However, the financial news service said China’s household debt is yet to reach crisis point. At its 2007 peak, household debt in the United States reached almost 100 percent of GDP as individual borrowers speculated on real estate and other debt-fueled assets.
Chinese household savings were almost twice as large as their debt burden at the end of 2015, with most residential properties typically purchased with significant down payments.
Instead, the highly indebted corporate sector is seen as the main risk, particularly those with significant U.S. dollar borrowings, as leveraging rises while profitability falls. China’s bond market has shown increasing signs of distress, with almost triple the number of defaults in 2016 compared to the previous year.
According to the Economist, around two-fifths of new debt is now swallowed up by interest on existing loans. It now takes nearly four yuan of new borrowing to generate one yuan of additional GDP, up from just over one yuan of credit before the financial crisis.
Financial crisis
In an October 2016 paper, International Monetary Fund researchers pointed to a high 20–25 percentage point “credit gap” in China, “comparable to countries that experienced painful deleveraging, such as Spain, Thailand, or Japan.”
According to the researchers, a credit gap above 4 percent “is a good predictor of financial crisis.” Similar credit booms have ended up in “either a financial crisis or a significant growth slowdown, or both,” they added.
The probability of a crisis increases if a credit boom lasts longer than six years, starts at a higher level of financial depth and develops faster. China meets all three criteria, the researchers stated.
While Beijing has moved to pursue capacity reduction in the coal and steel sectors, deal with 345 “zombie” firms and boost efficiency at state-owned enterprises, the IMF researchers suggest a more comprehensive strategy is required, including imposing moral hazard and improving corporate governance.
However, China’s leaders are seeking to prop up growth to ensure “social stability,” reluctant to tackle SOE and other reforms too seriously for fear of sparking unrest.
At its latest National People’s Congress, the ruling Communist party cut its growth target for 2017 to “around 6.5 percent,” down from last year’s 6.7 percent expansion, which was its slowest growth rate in twenty-six years.
Critics suggest the actual growth rate is much lower, with regional provinces having previously admitted faking data.
According to London-based consultancy Capital Economics, China’s GDP slumped from 6 percent at the end of 2014 to around 4 percent, only improving after last year’s massive stimulus by Beijing. It sees the growth rate fluctuating between 4.5 and 5 percent in 2017, depending on the authorities’ actions.
China’s ability to manage its debt issues will be crucial, if Asia and the rest of the world are to avoid the damaging side effects.
As warned by the Economist : “The damage from a big Chinese credit blow-up would still be immense. China is the world’s second-biggest economy; its banking sector is the biggest, with assets equivalent to 40 percent of global GDP.
“Its stock markets, even after last year’s crash, are together worth $6 trillion, second only to America’s. And its bond market, at $7.5 trillion, is the world’s third-biggest and growing fast. A mere 2 percent devaluation of the yuan last summer sent global stock markets crashing; a bigger bust would do far worse.”
Governor Zhou was reportedly “in a very good mood, smiling and engaging with the deputy governors beside him as well as news journalists” at the recent press conference. Keeping that smile may prove far harder though in the year ahead.

Despite massive wage inflation, China will remain a leading manufacturing economy for the next 100 years due to the economies of scale set up within the nation, the huge domestic market, plus the ability of manufacturers to move up the value chain.

The key point is that China already has more expensive labor costs than Vietnam; its real bread-and-butter of the future won't be the low-end manufacturing many people like to imagine is the heart of China's competitive advantage.

China Daily:

"A lot of people tend to think when you can just head further inland you start hitting upon these bottomless pools of surplus labor enabling you to hold costs down indefinitely. We really don't see that happening," said van Kemenade.

The analyst added that the manufacturing emerging in the major inland cities such as Chongqing did not tend to be companies seeking ever cheaper labor but often those looking to set up advanced manufacturing facilities aimed at producing goods for the China market.

"The major investment, much of it foreign, that you have seen in these inland cities has not been the type that typically follows the cheapest sources of labor. It has been fairly high value-added advanced manufacturing," he said.

They'll move into ever-higher value products, and already are."

I believe the Economist Intelligence Unit is correct in their assessment. Manufacturing plants that produce notebook computers need to move to inland cities like Chongqing. As I understand it, Shanghai has higher aspirations of becoming the financial center of China.

Click to expand...

I think a zero is missing title. China shall be a leading manufacturing economy for coming 1000 years and not 100.

By Michael Martina | BEIJING
China's plan to boost domestic manufacturing by 2025 is "highly problematic" and could be used to discriminate against foreign firms in favor of Chinese competitors, a top European business lobby said on Tuesday.

Beijing's "Made in China 2025" plan calls for a dramatic increase in domestically-made products in 10 sectors - from robotics to biopharmaceuticals - that the government hopes will accelerate an industrial upgrade as economic growth slows.

Foreign business groups, however, have grown more vociferous in criticizing Beijing's lackluster market reforms, and worry that the plan will force members to give up key technology in order to access the market or bypass them altogether.

"Made in China 2025" amounts to a "large-scale import substitution plan aimed at nationalizing key industries" or "severely curtailing the position of foreign business", the European Union Chamber of Commerce in China said in a report.

Chinese policies, including hundreds of billions of euros in subsidies, were already harming European business, the chamber said.

"Under recently passed legislation in the new energy vehicle industry, for example, European business is facing intense pressure to turn over advanced technology in exchange for near-term market access," the group said.

"In the field of industrial robotics, government subsidies are contributing to overcapacity in the low- and mid-tiers of China's market; and in the information technology industry European business is seeing market access constrict further," it said.

A progressive increase in domestic parts used in such sectors to 70 percent by 2025 is among targets set out in the plan, which aims to use subsidies, technology standards, financial policy and government-backed investment funds to reach them.

Premier Li Keqiang told China's parliament at the opening of its annual session on Sunday that foreign and domestic companies "will enjoy the same preferential policies under the Made in China 2025 initiative".

But such pledges have done little to allay the concerns of China's trade partners, and there are growing calls in the United States and Europe for equal market treatment in response to what they see as Beijing's mercantilism.

The office of the U.S. Trade Representative said last week it would take aggressive action with other countries, including using "all possible leverage" to give U.S. producers fair, reciprocal access to their markets.
The nominee to be the next U.S. trade negotiator, veteran steel industry lawyer Robert Lighthizer, has long argued for such aggressive measures against China.

Chamber president Joerg Wuttke said the report was intended to "send a wake-up call to companies and members" about what the competitive landscape would look like in 2020 and 2025, as Chinese companies benefit from a protected market at home and then look abroad.

"The worry that we have is that this unbalanced competition landscape that we face in China might be replicated in our home turf," Wuttke told reporters before the report's release.

"Are you up to it to compete against state-sponsored companies in China as well as globally?" Wuttke said.

"Made in China 2025" is an initiative to comprehensively upgrade Chinese industry. The initiative draws direct inspiration from Germany's "Industry 4.0" plan, which was first discussed in 2011 and later adopted in 2013. The heart of the "Industry 4.0" idea is intelligent manufacturing, i.e., applying the tools of information technology to production. In the German context, this primarily means using the Internet of Things to connect small and medium-sized companies more efficiently in global production and innovation networks so that they could not only more efficiently engage in mass production but just as easily and efficiently customize products.

The Chinese effort is far broader, as the efficiency and quality of Chinese producers are highly uneven, and multiple challenges need to be overcome in a short amount of time if China is to avoid being squeezed by both newly emerging low-cost producers and more effectively cooperate and compete with advanced industrialized economies.

It appears that Made in China 2025 took at least one page out of America’s book. The Chinese plan foresees the creation of 15 manufacturing innovation centers by 2020 and 40 by 2025. A few years ago, the U.S. government co-founded a National Network for Manufacturing Innovation (NNMI) made up of several Institutes for Manufacturing Innovation, a concept similar to Chinese innovation centers. Although distinct from the Industrial Internet and the IIC, the NNMI bears a distinctive hallmark of industrial policy. In this sense, Made in China 2025, Industrie 4.0, and America’s NNMI all trace their origins to government activism.

In my forthcoming book on national security space policy, I dedicate an entire section into burgeoning technologies and how they play into space development, both in the civilian and military fields. Last September, I gave a speech to a group of VIP’s at the Institute of World Politics in Washington, D.C. on this issue. Bottom line: we live in the Information Age. The country and corporations that come to spearhead innovative research in technology will be dominant. And, despite what you may think, the United States is getting its clocked cleaned by foreign states such as China.

By the 1970’s, the computer had taken hold in the minds of great, aspiring innovators. And within 20 years, these innovators had fundamentally transformed the world that we live in. Looking at the world then, we seemed to be ruled by Moore’s Law. Back in 1965, Intel co-founder, Gordon Moore, found that the number of transistors per square inch on integrated circuits (computer chips) had doubled each year since they were created. Using this observation as a baseline, Moore extrapolated that this trend of doubling would persist into the foreseeable future. Track the evolution in technology from 1965 until 2017 and one can see that Moore was spot on.

Yet, popular modern thinkers, such as Dr. Michio Kaku have assessed that there is a limit even to Moore’s law. Indeed, Dr. Kaku believes that we may be fast approaching the moment when Moore’s Law no longer holds true. We will have fully developed technology based on the computer chip as we understand it. Dr. Kaku has proffered a vital caveat: he believes that through the creation of quantum computing we might be able to stave off the coming contraction from when we reach the limits of Moore’s Law.

IBM and several other companies have been spearheading research into quantum computing. What they have found has been promising. But, the technology is still in its infancy. The market is not yet there, so the R&D period will take time until the market matures and is ripe for the picking. This is a sound business practice. Unfortunately for America, however, the next leap in quantum technology will not come from one of its companies. In fact, the next revolution, the next “great leap forward,” if you will, is likely to come from one of America’s biggest rivals on the world stage today: China.

You see, last fall the Chinese placed their quantum internet satellite into orbit. To make a long story short, the Chinese have been investing for over a decade into burgeoning new technologies that they believe will have strategic capabilities. In this case, as I noted in my recent talk at IWP, China is trying to spearhead the quantum computing revolution. It is believed that the quantum internet will allow massive stores of data to be transmitted in a nearly un-hackable manner. Though, to be sure, Western scientists have assured policymakers that if China embraced their quantum internet as an alternative to the current U.S.-created internet, the transmissions could be hacked. But, as you are about to understand, the hacking will be unlike anything that we understand today.

Quantum computing is based off of quantum theory, which deals with the nature and behavior of energy and matter at the subatomic and atomic (quantum) level. This area of research was first postulated by Max Planck in 1900. Specifically, the quantum internet relies on what’s known as “quantum entanglement.” None other than Albert Einstein observed quantum entanglement in action. He referred to it as “spooky action at a distance.” Associate Professor Andrea Morello University of New South Wales, Australia’s School of Engineering has the simplest definition of quantum entanglement:

“Quantum entanglement suggests that acting on a particle here, can instantly influence a particle far away. This is often described as theoretical teleportation. It has huge implications for quantum mechanics, quantum communication and quantum computing.”

China’s quantum internet could revolutionize global communications in the same way that the internet did 30 years ago. And, in much the same fashion that the internet gave the U.S. a strategic advantage these last 30 years, the quantum internet could give China a significant strategic advantage. Think about it: by becoming the hub of the new internet, China will sit atop the new global communications network. Such a network will be unlike anything conceived thus far. Plus, its difficulty to hack will make it attractive to many states (not just America’s adversaries, but also friends, such as Germany, who are offended by American hacking). While many experts believe that they could hack quantum communications, they assert that the best they could do would be to destroy the information rather than steal it.

What’s made modern hacking so lucrative for hackers is that they can actually gather data from their targets. They can steal information from the hack. Unfortunately, quantum communications could only be disrupted by hacking. So, if the Chinese were sending top secret war plans for retaking Taiwan over the quantum internet, it is unlikely that American intelligence could steal those plans through hacking. The best that they could do would be to destroy information through hacking before it could be received.

The Chinese are convinced that this is going to give them a qualitative edge in their long-standing competition with the United States. While many American and Western businesses and scientists have expressed skepticism over the efficacy of this technology (they think it’s still too early to be of any use to most people yet), the Chinese are banking on being the pioneers of this new form of communication. In order for the Chinese quantum internet to work, the Chinese have had to develop an entire network of quantum receptors capable of relaying and deciphering quantum communications. They’ve made the first significant investment. China is dedicated to building out this technology.

A diagram of how China’s quantum internet works.

Whatever happens with the Chinese quantum internet, the fact remains that the Chinese have gained immeasurable knowledge in quantum technology. They are developing an entire ecosystem predicated on their discoveries in quantum theory. Look back at every game changing innovation in the past: it stemmed from something else that came before it. Furthermore, it inspired a litany of other innovations, loosely related to that initial innovation, and all of those advances piled upon one another, pushing humanity (and the countries and corporations that spearheaded those dynamic changes) to international dominance.

“43 percent of respondents said Silicon Valley’s crown would be passed elsewhere by 2016. China was named as the country most likely to be the next innovation center (45%) [that’s a plurality, by the way].” Read more here.

Why is this, do you suppose? It’s because countries like China have led the way in investing in educational policies that are instrumental in creating new frontier technologies like the quantum internet. The United States, on the other hand, has not. It has been riding on previous investments and innovations and has allowed itself to fall behind. China’s policies of sending their best-and-brightest to be trained overseas, like in the U.S., and then trying to woo those recent graduates back home, have paid back significant returns, especially for the Chinese. This is made easier because America’s H1B visa system is broken.

This stuff happens all of the time. Corporations misuse their ability to get foreign workers. You can understand why many Americans are suspicious of the H1B Visa program.

The American H1B “high-tech” visas no longer perform that which they were meant to do: train and retain the next great innovator from abroad. Thus, we have no problem training a Chinese student in a high-tech field and then, we have no problem also preventing them from being allowed to remain here. On the flip side, of course, our businesses misuse that system as a means of getting cheaper labor and putting native-born Americans out-of-work.

Meanwhile, Chinese State Owned Enterprises (SOE) are forming strategic partnerships with Western businesses as a means of gaining access to methods, technology, and capital that can be used to beef up China’s indigenous (and growing) high-tech industry. As Shapiro points out:

“Hisense, a huge electronics company based in China, is working with MIT’s Media Lab – the first alliance between the MIT Media Lab and a Chinese company – on talent training and project cooperation regarding smart technology, artificial intelligence and human-computer dialogue.”

Of course, Shapiro comments that China’s protectionist policies makes it “hostile to foreign investment and business.” Yet, China has always been protectionist. The protectionist policies have not yet hindered China’s ascent. Indeed, what is quite likely going on is that they have soaked up as much Western capital and technology as possible from the 1990s onward, that they are now confidently pivoting to sucking up the high-tech human capital from the West, in much the same fashion that they acquired the manufacturing and capital bases from the West. Whether this is sustainable or not is another matter entirely. What is certain is that, for the next decade at least, China will continue to be a competitor, even as its economic growth (and fertility rates) continues to generally decline.

Chinese officials have made no secret out of their desire to become the world’s dominant player in the technology industry. As we’ve written about before at The Next Platform, China has accelerated its investments in IT R&D over the past several years, spending tens of billions of dollars to rapidly expand the capabilities of its own technology companies to better compete with their American counterparts, while at the same time forcing U.S. tech vendors to clear various hurdles in their efforts to access the fast-growing China market.

This is being driven by a combination of China’s desire to increase its strategic, economic and military standing in the world through technology innovation and a desire to improve its national and information security, particularly given U.S. espionage efforts outlined in the documents leaked by former NSA analyst Edward Snowden. Among the goals in the country’s latest five-year plan – spanning 2016-2020 – is to establish China as a key player in technology research, development and innovation and in such areas as computing, robotics and biotechnology. Plans call for continued substantial government investment in these areas.

These efforts can be seen in such high-profile areas as HPC and supercomputing, where Chinese systems hold the top two positions in the Top500 list of the world’s fastest supercomputers, including the Sunway TaihuLight, which sits at number one with 93 petaflops of performance – more than the next five systems combined – is powered by ShenWei’s SW26010 many-core processor, a chip developed in China. At the same time, China is aggressively pushing efforts in exascale computing, with three projects underway to bring exascale systems to market. One project is calling for a prototype – called Tianhe-3 – being readied for 2018. The United States, through the National Strategic Computing Initiative, is preparing two exascale-capable systems for delivery in 2021.

U.S. officials and scientists have warned that the country that dominates the exascale era will have an edge in everything from business to national security to the military. Concern among U.S. scientists have increased in recent months over worries about possible federal budget cuts to scientific projects under the Trump Administration, which under the president’s proposed budget called for the Department of Energy’s Office of Science – which funds research into exascale computing, among other areas – to lose some $900 million from its $5 billion budget.

Scientists in the United States now are voicing concern that recent reductions in government funding and other challenges are threatening the country’s narrowing lead over China in another critical area – quantum technologies. In testimony given this month to the U.S.-China Economic and Security Review Commission, John Costello, senior analyst for cyber and East Asia at Flashpoint and a Cybersecurity Fellow for New America, warned that the United States narrowing lead in this crucial area is endangered by China’s aggressive funding and research. Losing the lead to China would have far-reaching consequences for both countries.

“The U.S. remains at the forefront of quantum information science, but its lead has slipped considerably as other nations, China in particular, have allocated extensive funding to basic and applied research,” Costello said in a written statement to the commission. “Consequently, Chinese advances in quantum information science have the potential to surpass the United States. Once operationalized, quantum technologies will also have transformative implications for China’s national security and economy. As the United States has sustained a leading position in the international affairs due in part to its technological, military, and economic preeminence, it is critical to take swift action to reverse this trend and once again place the United States as a frontrunner in emerging technologies like quantum information science.”

Quantum computing has been talked about for decades, and there have been efforts underway around quantum computing for much of that time. Current computers use bits that are in states either 0 or 1. Quantum systems use quantum bits – or qubits – that can be 0 and 1 at the same time. In addition, they are entangled – they share this same state with two or more qubits, but if interrupted by an outside force, will revert back to one of the two states, Costello said.

“In the future, quantum computers will be able to resolve complex algorithms, including those integral to most standard encryption methods,” he said. “Computations that would be impossible or infeasible for classical computers to perform can be performed by quantum computers at sufficient scale.”

D-Wave currently is the only vendor that offers a commercially-available quantum computer – the company’s latest D-Wave 2000Q has 2,000 qubits – though Costello said the systems use a form of computation called “quantum annealing” that is not considered “true” quantum computing. Other U.S. vendors, like IBM and Google, and agencies like NASA are creating public-private research groups. IBM last year made quantum computing capabilities available on the IBM Cloud to help drive innovation in the space, and this month announced IBM Q, a new division that aims to commercialize universal quantum computers for both commercial and scientific uses. In China, the highest-profile public-private partnership is through Alibaba and the Chinese Academy of Sciences (CAS). The Alibab Quantum Computing Lab is aiming to be able to coherently manipulate 30 qubits by 2020, to create a quantum simulation that has calculations speeds of today’s fastest supercomputers by 2025, and develop a quantum computer prototype with 50 to 100 qubits by 2030.

In his lengthy testimony, Costello argued that China – due in large part to significant government investment – is moving faster in innovating around quantum technologies (not only computing, but also cryptography and sensing, which includes such possibilities as quantum clocks, imagery, radar and navigation) and urged U.S. lawmakers to take steps to at least keep pace with efforts by the Chinese government. He noted some successes by China already, including the development of Micius, a quantum satellite that can transmit quantum information between it and multiple ground stations, and upcoming completion of the Quantum Beijing-Shanghai Trunks a ground quantum optical fiber communications system that will stretch about 1,240 miles between the cities. Plans are to expand it nationwide over the next few years and linked with other metropolitan-level quantum communications networks, and then develop a similar network between Asia and Europe by 2020. By 2030, a global network is planned. In September 2016, scientists from a lab within China 45 Electronics Technology Group Corp. announced they’d made progress in creating a quantum radar that they said will be able to detect targets up to 100 kilometers away with better accuracy than current radars.

Costello’s comments about the danger the United States faces in falling behind in the quantum computing research and innovations echoes what others have found. He noted a study by MIT and a report in The Economist that the reduction in government funding has slowed innovation. In addition, a 2016 report by the Obama Administration focused on federally-funded quantum IS programs also noted a narrowing innovation gap, caused by multiple factors, including an instability of funding levels, education and workforce training, technology and knowledge transfer, and institutional boundaries within academic institutions. A key advantage for China is the stability of funding, Costello said.

“The lack of consistent funding at home, coupled with ample Chinese funding abroad, may persuade researchers to collaborate with China on larger projects or pursue their research in Chinese institutions,” he said, pointing out that an Austrian scientist had developed the technical expertise for a quantum satellite like Micius, but was unable to get funding in Europe, opening the door to China developing the technology. “It should be noted that these factors do not account for the substantial advantages the U.S. enjoys over China in the area of overall quality and number of academic institutions, venture capital investment, industrial and technological base, and quality and speed of private innovation. However, these advantages are narrowed considerably by China rising economic dominance, multiple forms of tech transfer, talent recruitment programs, and comprehensive state-level R&D funding programs.”

His recommendations to Congress focused on ensuring lawmakers better understand emerging technologies like quantum IS, machine learning and artificial intelligence. Included in his recommendations are the creation of publicly-funded think tanks to study issues around the technologies and China’s innovation efforts and the restoration of public funding for the Office of Technology Assessment (OTA), which was funded between 1972 and 1995 to give Congress in-depth evaluations and policy options around emerging technologies. Current agencies like the Government Accountability Office and Congressional Research Service haven’t been able to give lawmakers the same level of expertise as the OTA. Costello also called for the creation of an interagency Commission for Investment in Strategic Emerging Technologies, which could better assess U.S. funding efforts around R&D, make recommendations to Congress and coordinate the work of relevant federal agencies.

It’s important that the country takes such steps, he said.

“Due to the pace of innovation and economy, the first-to-market advantage here is exponential and will yield near intractable market dominance,” Costello said. “The United States is already challenged by the industrial might and growing human resource base of China’s emergence on the world stage. Some of the few, though critical, advantages the United States possesses is dominance in emerging technologies, world-class academic and research institutions, and a central position in information and Internet technologies. If continued Chinese investment in these areas are not met with an appropriate U.S. response, these factors will shift, likely at the expense of the United States, and the strategic balance of power will continue to tilt in China’s favor.”

Western production lines for the most part can only build one submarine at a time, and only the US is capable of building two submarines simultaneously, but China is now capable of building four submarines at one time.

China currently has about three submarine production lines and can build 5 to 6 submarines at one time. This would mean in three years China could be building ten to twelve submarines at one time.

Type 094 submarine

The Type 096 submarine is a SSBN (nuclear ballistic missile submarine) being developed for the Chinese People's Liberation Army Navy Submarine Force. Official specifications are unknown. The Type 096 may carry 24 SLBMs, double the number carried by its predecessor, the Type 094. According to analysts, it could also feature a hull similar to Western SSBNs. As of January 2017, the Type 096 has yet to enter service.

The Type 095 submarine is a proposed class of third generation nuclear-powered attack submarines for the People's Liberation Army Navy (PLAN) of China.

It is anticipated that Type 095 submarines will have a substantially reduced acoustic signature, within an improved hull type and pump jet propulsion system. Compared to the Type 093, the Type 095 will have a more advanced nuclear reactor, VLS tubes and greater number of advanced sensors such as new active/passive flank array sonar and low and high frequency towed sonar array. Additionally, it is also speculated that Type 095 submarines may act as a potential undersea escort for any future PLAN aircraft carrier task forces.